TAX FACTS
FROM THE TAX POLICY CENTER
tax notes™
Tax Subsidies for Health and
Housing Top $600 Billion
By Georgia Ivsin and Donald B. Marron
Tax expenditures will total more than $1.4 trillion
in fiscal 2014, almost half as large as expected
federal revenues. Individual income tax provisions
make up the majority of that figure, including more
than $1 trillion in reduced revenues. Corporate
income tax expenditures total about $150 billion,
although that figure will increase if Congress extends some of the tax breaks — often known as
‘‘extenders’’ — that expired at the end of last year.
Health and housing account for more than 40
percent of tax expenditures, about $640 billion. The
biggest chunk goes to health policies, most notably
the exclusion for employer-sponsored health insurance and the new premium assistance credit enacted as part of health reform. The exclusion
reduces receipts from individual income and payroll taxes by more than $300 billion, while the credit
boosts outlays by $34 billion. Another sixth of tax
expenditures go to housing policies, primarily the
mortgage interest deduction, the exclusion of imputed rental income, the capital gains exclusion on
home sales, and the deductibility of property taxes.
These figures come from adding together the
most recent tax expenditure estimates reported by
Treasury in the Analytical Perspectives volume of the
president’s budget. Those estimates show how
much each provision reduces individual and corporate income tax receipts; footnotes report additional
effects on payroll and excise receipts and on outlays
resulting from credits. Treasury does not estimate
the total budget impact of all tax expenditures
together. Adding them is imprecise as it does not
account for interactions among the various provisions. Also, the estimates do not reflect any behavioral responses that might occur if policies change
and thus do not necessarily represent the amount of
revenue that Congress might be able to raise by
scaling back these provisions. Nonetheless, these
estimates do demonstrate the substantial amount of
policy made through the tax code and, in particular,
how much is directed to health and housing.
Tax Expenditures in Fiscal 2014 (dollars in billions)
Category
Individual
Corporate
Revenues
Payrolla
Excisea
Subtotal
Outlays
Total
Health
$223
$3
$123
$0
$349
$34
$383
Housing
$247
$9
$0
$0
$255
$0
$255
Pensions and other income security
$158
$2
$0
$0
$160
$0
$160
Capital gains and dividends
$117
$0
$0
$0
$117
$0
$117
Foreign income and other international
$5
$79
$0
$0
$85
$0
$85
State and local governments, general
$70
$8
$0
$0
$78
$3
$81
Earned income tax credit
$4
$0
$0
$0
$4
$58
$63
Business, finance, and research
$25
$36
$0
$0
$61
$0
$61
Children and dependents
$30
$0
$0
$0
$30
$22
$52
Education
$38
$2
$0
$0
$40
$7
$47
Charity, except for health and education
$42
$2
$0
$0
$44
$0
$44
Social Security
$41
$0
$0
$0
$41
$0
$41
Other
$35
$9
$0
$1
$44
$5
$49
Total
$1,036
$148
$123
$1
$1,309
$129
$1,438
a
Incomplete. Treasury provides estimates for select payroll and excise tax expenditures only.
Source: ‘‘Fiscal Year 2015 Analytical Perspectives: Budget of the U.S. Government,’’ Table 14-2, Office of Management and Budget (Apr. 2014).
Tax expenditures amounts are calculated by summing individual provisions.
TAX NOTES, April 28, 2014
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